South Africa’s retailer Massmart reports decline in earnings amid expansion plans

SOUTH AFRICA – South African retail group, Massmart Holding Ltd, has reported a drop in half year headline earnings by 31.7% to US$63.85 million during the six months to 30th December 2018, reports Business Report.

Massmart said that sluggish growth in sales coupled with increased expenses caused a decline of the group’s trading profit by 16.8% to US$148.83 million – excluding foreign exchange movements, interest and restructure.

The owner of the locally operated brands, Game, Makro, Builder’s Warehouse and CBW, also attributed the performance to a difficult operating environment during the period.

“Notwithstanding the difficult environment Massmart maintained strong market share across durable goods categories including; small and large domestic appliances, hi-tech and most DIY (do it yourself) and hardware categories,” it said.

However, Massmart’s South African stores posted a 2.9% growth compared with 1.5 % for comparable store sales.

Total sales from stores outside South Africa grew by 3.9% in constant currencies.

“We’re encouraged by that, but the readings that we’re getting about the economy are negative and muted and so are very cautious about the next six-months,” Guy Hayward said.

Guy Hayward, Massmart’s Chief Executive, has also unveiled plans opening 47 new stores between 2019 and 2021, with about a third of the new space outside its home market – Kenya and Zambia being its major focus markets, reports Reuters.

“Zambia and East Africa are interesting to us because they’re not totally dependent on mineral resources like West Africa is,” Hayward said.

“Kenya and Zambia have quite strong tourism industries and little bit of local industries so the economic play there is a bit more robust.”

Hayward said that the group plans to open a Builders Warehouse in Kenya in October, among four other stores and five in Zambia.

The Group said that it was cautious about the outlook for the local consumer economy for the first-half of 2019 in South Africa – which generates 91.3% of its group sales.

This comes at time when a number of South African retailers have continued to invest outside their domestic market where growth has stagnated due to the weak economy.

Massmart is the second largest retailer in South Africa with majority of its stake controlled by US based Walmart Inc.

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